I know if a borrower is going to purchase a new home and convert their current home to a rental FHA will not allow the rental income to be used unless they have 25% equiity.

I am trying to refi a primary residence that the borrower purchased over a year and a half ago. The borrower tried to sell their previous home but now the borrower has decided to rent out their previous home. Will FHA allow the rental income be used since they already own the home that I want to refi. I have a lease agreement on the previous home. Does this fall under the "buy and bail" guidelines since this is not a purchase transaction?

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